James Hall

8- 9-17

C O R P O R A T O C R A C Y

Chinese Corporatism Turns Sour

As even the casual observer of the effects from the corporatist model for economic commerce knows, permanence in a developing prosperity is transient at best. What becomes the rush to ratchet up industrial production ends up in a piercing disappointment for long term stability. China is the latest example of a corporatist model in serious trouble. And who will suffer the most? Those dependent on export manufacturing are clearly poised for a very bumpy ride. While the oligarchs play global chess with their foreign companies, the enterprise of creating a rise in world-wide wealth suffers.

“Trade deals such as the North American Free Trade Agreement (NAFTA) began to decimate the U.S. manufacturing base. NAFTA went into effect on Jan. 1, 1994. The “giant sucking sound” predicted by Ross Perot began. Plants closed, releasing workers who had earned $15 - $20 an hour. Operations went to Mexico, for labor that cost the owners perhaps $1 an hour (these figures aren’t exact, but you get the idea). NAFTA wasn’t the first. The original General Agreement on Tariffs and Trade (GATT) dates from the 1940s, during the wave of fascination with global governance which also gave us the UN, the IMF, the World Bank, and Bretton Woods. With GATT II put in place the year after NAFTA and the newly created World Trade Organization overseeing things, manufacturing went to China for still cheaper labor.”

For the last several decades China was conducting the bulk of manufactured business because the globalist corporatist model was meant to bankrupt Western economies. As production ramped up, the former middle class in Europe and North America saw a sharp decline in their living standards. Chinese cheap labor was the magic ingredient that attracted the mass exodus of U.S. business from our shores.

“If all of these ghost cities and ghost suburbs were part of a master plan hatched in Beijing by the central government, I'd imagine we'd see more affordable housing, as that's what is needed in China. Instead, most of the housing that's been built in these empty districts are luxury condos and villas. I have a hard time believing people will eventually move into these empty complexes in the next five years, especially in the scenario of a cooling economy.”

“In 2014, Chinese factories accounted for about a quarter of the global ranks of industrial robots — a 54 percent increase over 2013. According to the International Federation of Robotics, it will have more installed manufacturing robots than any other country by 2017.

Chinese factory jobs may thus be poised to evaporate at an even faster pace than has been the case in the United States and other developed countries. That may make it significantly more difficult for China to address one of its paramount economic challenges: the need to rebalance its economy so that domestic consumption plays a far more significant role than is currently the case.”

“China’s stock markets are, for the most part, a mom and pop affair—about 80% of the trading that happens in Shanghai and Shenzhen is done by Chinese individuals. They represent at most 14% of the total Chinese population.

But there’s little doubt the effects of this downturn will be felt globally—it just may take some time. After all, Chinese investors have lost more about $3.4 trillion in equity value from the markets mid-June peak until the July 7 close.”

“China is about to show its third straight quarter of negative real (after inflation) GDP growth. The nation had been relying on a stock market boom to play a “decisive role” in funding the nation’s “Silk Road” reforms to transition to a consumer economy.

But as Breitbart News warned in “China’s Lehman Brothers Weekend Begins,” the “Red Dragon” has suffered a financial collapse equivalent in degree to the U.S. stock crash in 2008-9. Unlike the U.S., which used a formal government bailout to stabilize markets, the Communist Party instructed the nation’s banks to use their own balance sheets to guarantee the current $8 trillion stated value of all of China’s 2800 listed stocks.”

It certainly seems that the Chinese Corporatist prototype is not perfected. The improvement in the standard of living for the Chinese underclass may well have come to a halt. The frightful implication that productive and mutually beneficial commerce only exists for the elites is the only conclusion an objective observer can reach.

The engine of global wealth creation is in serious trouble. Now the financial calamity is brewing in China. When the Chinese dump most of the T-Bills, will the U.S. Dollar survive?